It’s been my privilege to know Markus Jooste for some years. We met through a shared passion for thoroughbreds, and ended up spending time in each other’s company, including serving together on a couple of boards. Every few months I try to catch him for a cup of tea, always a highlight. Steinhoff’s CEO is super smart, great in a crisis, highly focused, deeply loyal and courageous. Attributes every investor seeks in his company’s CEO. But there are many others with similar attributes. What makes Jooste special is he is also very, very lucky. Whether that’s in the timing of business deals or in the purchasing of racehorses (his very first was a Champion – odds of about 20 000 to one) he enjoys a relationship with Lady Luck that no amount of money can buy. Then again, Jooste also works really hard. And as SA’s greatest golfer and fellow thoroughbred enthusiast Gary Player described himself, the harder he worked the luckier he became. – AH
ALEC HOGG: This week Steinhoff reported full-year results. I went along with a camera team to the Wynberg office of the now-global company and it’s only the Wynberg office, because the Head Office is in Stellenbosch and they have another big office that’s going to be opening up soon in Frankfurt. I sat down with Chief Executive Markus Jooste. I asked him a lot of things, including his reaction to the recent drop in the share price to below the level (R52) at which they raised R18bn…..
MARKUS JOOSTE: I think it’s quite normal actually Alec, because South Africa – with the Abil and Ellerines incident, which isn’t good for the country – has obviously made investors nervous, especially overseas investors of which we now have a lot after our foreign capital-raising for Steinhoff in the country. I wasn’t too perturbed by it because I think it’s fair for them to have been nervous about what’s coming. Hopefully, we provided them with a set of results that would comfort them in total, but by the same token, it’s never nice to have invested in a subsidiary that must write off a lot of money, (which we had to do). However, when we took over, we immediately took the steps we had to take. The books have gone backwards in the last 12 months/six months (increasingly). It therefore is a problem in the country, and specifically, the type of credit that might have been granted in 2011/2012. We’ve taken the corrective measures, though. We’ve now sold the book to a very big international consumer finance house and I think it’s great for the country.
ALEC HOGG: Is the exposure over then, on JD?
MARKUS JOOSTE: Yes Alec, the exposure for us will be over on the lending side. We’ve provided for everything that we had to and in the next few months, we will finalise the sale. In the financial statements, it is clear how much we’re getting for the business because we’ve stated it in the announcement. I’m very pleased that that’s behind us and now we can concentrate on retail, which I think we’re good at. You don’t become the second biggest in the world if you’re bad at it, but this is the first time that we have the opportunity to bring that expertise properly to South Africa.
ALEC HOGG: It’s an extraordinary story. Before we move onto the global ambitions, we were talking to Jan van Niekerk from RECM this morning. He said that with JD Group, it’s as if you’re renovating house. However, what many people will forget is if the asset managers hadn’t blocked you, you might have done this deal a long time ago.
MARKUS JOOSTE: Well Alec, you are now fortunately part of that. You and I discussed that often in 2007 when we made the bid the first time. You will recall that was four months before the financial crisis and we would have sold the book then at twice the book value to a very big international player. By now, I might have had the retail job done in terms of renovating the house, but one must never look back or try to look clever. We must deal with the facts that are on the table now. People have the prerogative to do what they believe, but this time around we have the opportunity and with 86 percent of the shares, we are putting all our efforts behind JD and we’ve opened the whole world for them to participate. Peter Griffiths is probably one of the best CEO’s that we’ve had in the Steinhoff Group. We groomed him and he understands this business, so I’m very positive. It’s not a short-term play. It’s going to take time. With market rationalisation and a concept it takes time, but fortunately, JD has wonderful other businesses in it. As you know, we put our Unitrans motor business in there as well as Penny Pinchers and Timber City. All the businesses we put into JD, performed exceptionally well.
ALEC HOGG: It’s just as well.
MARKUS JOOSTE: Yes, just as well.
ALEC HOGG: Are you looking at Ellerines as a possibility?
MARKUS JOOSTE: Alec, we currently have enough on our plate. For me, Ellerines is obviously a very sad thing because it’s very close to my heart. I’ve been in the game since ’88, went to Germiston. On Saturdays, I’d listen to product knowledge session with Sid and Eric Ellerine, so my heart aches for Ellerines, and what happened there, but that’s life. Things have moved on. We have as many stores as they have, so we have a lot of work to do. Depending on what Business Rescue wants to do, we’re always there to look and to help (especially on behalf of the country). I’m obviously worried about the 10,000 people who work there, who might lose their jobs so if we can help we will but currently, our priority is to sort out our own house.
ALEC HOGG: Internationally though, it’s a wonderful story: starting off with the raising of capital. It wasn’t long ago that the market cap of the whole of Steinhoff was R18bn.
MARKUS JOOSTE: Yes, Alec, that is obviously a fairy-tale, when you start thinking of market caps and a market cap of more than R100bn. Even though I’m an optimist, I would never have dreamed of something like that, but I must say that our corporate team has done a fantastic job in raising this capital. You know, Alec, we raised it the first week of July. Five days later, they shot down the plane in the Ukraine and the war started, and Gaza happened the next week. I don’t think you can do it today. This time, we certainly have Mr Luck on our side.
ALEC HOGG: Markus, what about the Frankfurt listing? There are concerns that one of our great industrialists is now going to be relocating and setting up house elsewhere.
MARKUS JOOSTE: I can understand the concern, which is absolutely normal. Alec, I think those people who know us, know that we are all truly blood-South Africans and after next year – 26 years in this game and building the foreign business since ’95 – if my team members and I wanted to leave we could have left a long time ago. Our place is here. We are based in Stellenbosch. That’s a big privilege to run a company from there. We travel a lot but I can tell you one of the specific conditions of listing the new Hold Co in Frankfurt is that that Hold Co Company must be managed from South Africa and will be a taxpayer in South Africa, so South Africa is losing nothing. South Africa is gaining. I think it’s a wonderful coup for South Africa and the Reserve Bank has done us a big favour by doing this, but they’ve also done it well for South Africa.
We’re therefore very proud to continue running this company as a South African Company from South Africa and being listed on a foreign stock exchange.
ALEC HOGG: That’s an important point. How much tax are you likely to pay next year?
MARKUS JOOSTE: Alec, I can’t go into that sum.
ALEC HOGG: But it’s a big number.
MARKUS JOOSTE: Yes, the group pays hundreds of millions and it’s obviously the legal entity itself, and not the group. Obviously, the group pays in every country. Transfer pricing has become a very complicated matter, but that proves the bona fides of both ourselves as well as the treasury, that’s we’re not just going to allow South African companies to emigrate for the sake of leaving the country. That’s not going to happen.
ALEC HOGG: The whole global strategy, though… You’re now pretty much everywhere in Europe, the Pacific Rim, you’re very strong in the U.K. as well and the second biggest furniture retailer in the world. Is the next step to be the biggest, to be bigger than IKEA? What’s on your mind? You’re still young.
MARKUS JOOSTE: Look Alec, to start talking about ‘bigger than IKEA’ is total arrogance. IKEA is one of the most fantastic retail success stories in the world. For all of us, Mr Kamprad is an idol to follow and we have obviously modelled Steinhoff on what he has done in the early parts of his career with the vertical integrated ‘own your own properties, big shops, discounts, and value for money’, but we are local. However, he offers the same offering in every country in the world where we would provide the French, Germans, or English with what they want and that’s where we differ, so I don’t see us competing with IKEA. In many places where our shop is opposite IKEA, we both do the best so we actually complement each other. For us, it’s not a question of beating IKEA. It’s more a question of coming to the same level of profitability that they have.
